Regulated ETH Futures? Not So Fast

Earlier this month, Heath Tarbert - the new Chairman of the U.S. Commodity Futures Trading Commission - declared that ether, the token of the ethereum blockchain, was a commodity.

Why? Because it opens the door to the possibility of regulated ether derivatives in the near future.

We will not see ether futures in significant volume on a regulated U.S. exchange any time soon.

Ether futures currently trade on exchanges based outside the U.S., but volumes have been thin relative to the spot market.

On BitMEX, Huobi and Deribit, three of the largest crypto platforms that offer ether futures, the average 24-hour volume is less than 10% that of bitcoin, while the equivalent ratio in the spot market is almost 25%. The difference could be due to ethereum's relative youth, and the gap could close as the network matures.

The real barriers to a successful launch of ether derivatives go much deeper.

Even more worrying for ether derivative watchers is the upcoming consensus algorithm shift.

Ether may be a "Commodity" in the eyes of the CFTC - but, traditionally, commodities can't change their history or their characteristics.

Ethereum's proposed algorithm change could lead to a bigger adjustment: ether could stop being a commodity and become a security.

Given ethereum's development stage and outlook, as well as little evidence of unsatisfied demand, ether derivatives on a U.S.-based regulated exchange are unlikely any time soon.